Author: Andrew Packer

Economy

The Compound and Friends: Pulling Out

Posted on by Andrew Packer

In the latest Compound and Friends podcast, the roundtable discusses a number of macroeconomic issues. The biggest issues pertain to the sanctions facing Russia right now.

The rise of NATO and its expansion Eastward since the collapse of the Soviet Union may have been a precipitating factor for Russia’s invasion. Creating a way to guarantee the safety of Eastern European countries without the formality of a NATO membership may be necessary. Why? To deter future transgressions.

Meanwhile, the economic sanctions against Russia are leading to higher energy prices globally. And energy reserves in Western European countries are dwindling. On the plus side, it is the tail end of the winter season. It will take months to adapt to the changing energy market. But those reserves will need to be rebuilt before the next winter.

The sanctions against Russia appear to pack some teeth. That’s thanks to the country’s gradual shift away from US dollar assets over the years. As a result, Russia is well prepared to deal with the consequences of being kicked out of the global financial system.

The ruble has fallen tremendously in international markets. But domestically, President Putin has seen his popularity soar. And the country is on the verge of having a currency backed by its physical resources. However, Russia is now asking for hard metals as a means of payment for its energy reserves, which puts it on solid footing going forward.

The full podcast, running about 1:26:30, can be heard here.

Economy

Invest Like the Best: Marko Papic – a Multi-Polar World

Posted on by Andrew Packer

Marko Papic, partner and chief strategist at Clocktower Group, leads the firm’s research on macroeconomics and markets. Marko has spent his career at the intersection of finance and geopolitics.

Along with Russia and Ukraine, it’s clear that the multi-decade trend of increased globalization is at an end. This fragmentation could be regional, as seen with a potential alignment between Russia and China. This new partnership could prove stronger than in the days of the Soviet Union.

Meanwhile events have caused the US and EU to set aside many of their differences in the interest of global unity. That’s true even as economic sanctions could impact Western economies over the long term. Europe has to source its energy needs from more expensive sources. And the US dollar could potentially lose its dominance.

Meanwhile, high energy prices are also stalling out the green energy themes. A revolution was supposed to create new, high-paying jobs, and end dependence on foreign energy. The fact of the matter is, such a transition will take time to play out. And fossil fuels will likely never go away.

The surge in energy and other commodity prices also makes it more difficult for the Federal Reserve to perform its job of raising interest rates to combat inflation. Any move may be too little, too late, and ineffective against rising prices due to higher energy costs.

The full episode, running about 1:09:30, can be heard here.

Cryptocurrencies

What Bitcoin Did: The End of the Dollar Hegemony with Nic Carter

Posted on by Andrew Packer

Nic Carter, a Partner at Castle Island Ventures and co-founder and Chairman of Coin Metrics, discusses a number of monetary issues toay. That includes the seizure of Russian Central Bank assets by the G7, and the potential demise of US hegemony. It also includes the growth of a multi-reserve currency world.

Russia has now turned to gold, the ruble, and even Bitcoin for international trade amid Western sanctions. As a result, the decline of the US dollar in global trade is starting to mirror the passing of past empires.

Investors should be cautious about the dollar remaining first among equal in the world of fiat currencies. History shows no fixed dates for the end of a currency regime. Instead, declines face prolonged unwinding. We could be in the early stages of one such unwinding today.

Already, the role of the US dollar has been eroded over the past few decades as economic sanctions have been increasingly deployed as a coercive tool of power. And as other nations have started engaging in bilateral trade agreements.

Nevertheless, the G7 freezing Russian access to its foreign assets has accelerated the pace of countries shifting out of the Western banking system. As a result, the US dollar will no longer act as a store of value across the world. Again, that could end up harming the US more than Russia. That’s even without the two countries getting into a shooting war.

The full episode, running 1:15:47, can be heard here.

Value Investing

Wall Street Silver Official Podcast: Silver Supply Extremely Tight, Tyler Wall, CEO of SD Bullion

Posted on by Andrew Packer

Physical precious metals have been in strong demand over the past month following Russia’s invasion of Ukraine. Not only have prices risen, but so has the premium that investors are paying to acquire physical gold and silver.

On the Wall Street Silver Official Podcast, Tyler Wall, CEO of SD Bullion, came on to provide a behind-the-scenes view of the silver market. He discusses why investors may not be able to find products in their local coin store anytime soon.

Demand has soared significantly, and coin stores placing orders may not be able to have all their orders fulfilled. That can lead to shortages just as demand has started to soar.

With low allocation from mints and miners, even governments are starting to shut down production of coinage. That includes US American Eagle coins, Canadian Maple Leafs, and other popular silver products.

Gold is seeing the same pressure as well, especially as its price shot up over $2,000 per ounce only to come back down as markets have trended higher one month into Russia’s invasion of Ukraine.

Should investors expect relief anytime soon? Probably not, given the latest talks about Western nations turning away from precious metals sourced from Russia.

Plus, central bank and banker demand for precious metals has shot up in recent weeks as well. That means traders interested in physical silver could be getting set up to benefit from a possible squeeze in the coming months.

The full episode, running 14:36, can be heard here.

Stock market strategies

GreenWood Investors Q4 2021 Letter

Posted on by Andrew Packer

In a piece called The Acceleration of Time, hedge fund GreenWood Investors looks at the issues facing markets at the end of the year, and into the start of 2022.

The fund first noted that the worldwide decline in markets since November led to a number of growth stocks losing more than half their value. At one point, even more than 50 percent of NASDAQ-listed stocks had been cut in half (or worse).

Overall, the fund reported a poor quarter, but a solid year. And years matter more than quarters when investing. The fund has noted that the past few years have most mimicked the period from the first World War to the Spanish Flu, to the Roaring 20s thanks to generous stimulus programs.

While the recent pullback may not be the start of a new Great Depression, it does indicate that high volatility and rapidly-changing trader attitudes are here to stay.

The fund also notes that large, mega-cap tech companies are starting to turn on each other as they relentlessly focus on their own growth at any cost. One such example is Apple (AAPL), which made privacy changes that adversely impacted Meta Platforms (FB) to its own benefit. Further moves in that direction could harm investors in unexpected ways.

The letter concludes with the challenges of looking at both the short-term and the long-term, an issue that every investor or trader has to contend with, whether they like it or not. Staying humble and looking carefully ahead can mitigate much financial pain.

Those interested in reading the full 8-page letter can do so here.